Understanding clients to help them navigate tough times

COVID-19 has presented companies with a myriad of unprecedented challenges—and now they also face a hard market. Against a backdrop of rapid change, including intense consolidation between brokers, AXA XL is intent on getting to know its clients, and brokers, better than ever, explains Bob Peretti, the chief distribution officer at AXA XL Americas.

While COVID-19 and the subsequent restrictions on society have meant unprecedented challenges for companies of all sizes and types in the US, for many there are only more hurdles ahead. The biggest economic downturn in a generation will mean more pain for many—and on top of that, insurance rates are soaring, adding insult in injury.

Such circumstances make for a complex landscape for insurers too. The needs of their clients have changed—but so has their own cost of capital. The need for insurance remains, and is greater than ever in some lines, but the risk has changed. And all this in the context of a market that has been reshaped by consolidation and fundamentally restructured by technology.

Against this backdrop, Bob Peretti, the chief distribution officer at AXA XL for the Americas, believes he, and his business, can make a difference. He took on the role only in July this year as part of a leadership reshuffle at the business. Prior to joining what was then XL Catlin in 2015, he spent the majority of his career with Marsh, with stints at Zurich and AXIS. Since then, he has led AXA XL’s North America client and distribution management team.

In his new role, Peretti still leads the client and broker distribution function but expands his responsibilities to include the global management of key broker relationships. He also assumes the management of the Americas marketing function in collaboration with the global marketing function.

He accepts these are challenging times for clients. Most have endured some tough times through the COVID-19 pandemic; many have been forced to repurpose or restructure their businesses in response. For some this will be a long-term positive; for others it was a short-term necessity. Whatever the reason, Peretti believes, it should be the role of an insurer to support them at this time.

“Many lines of business needed a correction, to restore the financial health of insurers on certain lines.” Bob Peretti, AXA XL Americas

Changing risk profile

“The risk profile of many of our clients has changed significantly and that means we need to listen carefully—ask more questions, but then listen,” he says.

“For me, this represents an opportunity to prove our worth. We know clients value things such as the fact that we are a reliable and trustworthy payer of claims, but the bigger picture is that we want to be a true partner to them.”

“As the situation with the economy evolves, that will become critical. We can help in terms of helping manage their risk profile and by making available to clients a whole range of technologies that can help them better understand, and manage, the risks they face.”

Peretti mentions a partnership the insurer has with Marsh to deliver incremental auto coverage to companies that needed to contract with delivery drivers to get their products to their customers.

This help might be appreciated by clients, especially against a backdrop of a rapidly hardening market, across most lines of business. Peretti stresses that rate increases must be viewed in the context of the fact that they have been inadequate on some lines for many years.

Trends such as increased catastrophe losses, social inflation and a number of so-called nuclear verdicts in the US have meant a correction was needed—even before the losses and uncertainty generated by COVID-19.

“Many lines of business needed a correction, to restore the financial health of insurers on certain lines,” he says.

“We are learning that we can have more frequent interactions with clients and brokers thanks to technology.”

Good communication

For all the reasons listed above, this is a sensitive time to broach the subject with clients and brokers. Peretti agrees this is the case but says that AXA XL’s strategy has been to speak to clients early and be honest about how rates are changing—and why. This approach has been greatly appreciated, he believes.

“We have tried to communicate early and often to our brokers and clients about this challenging rate environment, and what we think we will need for the upcoming year,” he says.

“Many of those conversations have not been easy but the fact is that clients and brokers do appreciate the early communication. We explain what we need to do and why, and they generally understand the situation.

“We look at each client individually, but we have to look at the portfolio as well. As a result, retention has been very good. It shows that we are telling the story correctly.”

One of the thorniest issues, Peretti admits, is the question of how the business interruption (BI) coverage responds.

“The fact is that our approach on claims is always to look for ways to partner. This means a careful review of policy language, looking closely to find and agree on coverage, but it can be hard when issues such as these arise.” All the more reason to get to know clients better, he adds.

“Plus, you have the economic uncertainty, uncertainty around the presidential election and uncertainty in the business models of so many clients. We need to be closer to our clients than we have ever been during renewals. But necessity is the mother of invention—and we continue on our mission.”

“We’re giving brokers and clients more direct access to our decision-makers.”

Broker strategy

A big part of Peretti’s mandate is to reset and improve the company’s alignment with the brokers it relies on—wholesale and retail. He says he wants that strategy closely integrated with the company’s overall marketing efforts in a way that ultimately differentiates the company’s offering and makes for a better client-broker experience.

Key to this strategy is a new geographical structure of the US business, which AXA XL has split into three regions, each of which will have a dedicated zone leader. He believes this will lead to deeper relationships with brokers, saying: “We’re giving brokers and clients more direct access to our decision-makers. We will be empowering our teams in those zones to get to know our brokers and clients a lot better and then be able to act.”

This strategy must be implemented against a backdrop of an ever-changing landscape as far as brokers are concerned. Regional, national and international consolidation of brokers has led to many dislocations in the market, with client relationships changing, talent moving or leaving, and smaller brokerage houses being formed. Peretti says the difference is often stark.

“When we attend the annual Counsel of Insurance Agents & Brokers (CIAB) Insurance Leadership Forum, it is obvious every year that there are simply fewer brokers.

“If you look at the top 20 brokers 30 years ago, they have all now been acquired. So there is always the question: who is next?

“The market is evolving but the biggest driver is consolidation. We are adapting to this, and the solution is investing in those key broker relationships. We need to make sure they understand our appetite and strategy, and we need to understand the brokers client portfolios, and the needs of the clients that make up those portfolios.

“It does add uncertainty and there is a churn of talent you need to keep track of. But the way to deal with that is by focusing on those relationships and making sure we are proactive at all times,” Peretti explains.

On balance, he says, although clients understand the economics driving consolidation between brokers, they prefer a greater choice of brokers and less disruption.

“Sometimes they end up working with a broker they did not originally choose to work with, so they can have mixed feelings,” he adds.

“The market is evolving but the biggest driver is consolidation.”

As with every other business at the moment due to COVID-19, AXA XL’s executives are having to manage and cement these relationships from afar. Most of the industry’s events have been cancelled and face-to-face meetings are off the table, replaced by video calls and conferences and virtual communications.

However, while acknowledging the importance of in-person meetings, Peretti says this has opened up a whole new world of possibilities—and he is proud of the way the company has adjusted so quickly.

“This is a very relationship-driven business and initially we were very concerned. But we adjusted quickly and have remained engaged with brokers and clients throughout. If anything, there has been some silver linings amid the challenges.

“Without the need to get on planes and travel across the country, we have done many more strategic ‘virtual’ meetings in this way than we would have normally done,” he says.

For example, in place of the RIMS risk management conference, which was cancelled, the team conducted a virtual RIMS campaign over 60 days which included meetings with more than 150 clients.

“We would not have done that many strategic, one-to-one client meetings over that period of time under normal circumstances,” he says. “We were able to speak to people frequently and very efficiently.”

The firm has now started a similar campaign with wholesale brokers, Peretti notes.

“It is a shame we cannot meet for lunch or dinner but we are learning that we can have more frequent interactions with clients and brokers thanks to technology.

“It is going to change the way we interact with clients and brokers in a significant way in the long term,” he concludes.

Images (from top): Shutterstock / Alvov, ByGurzoglu

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